SARAH GREEN: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Sarah Green. I’m talking today with Nilofer Merchant, author of the new HBR e-book 11 Rules for Creating Value in the Social Era.

Nilofer has worked at Apple and Autodesk, started her own firm called Rubicon. She’s been a board member. She’s been a lecturer at Stanford. And she’s a popular keynote speaker. Nilofer, thanks for taking time out of all of that to chat with us today.

NILOFER MERCHANT: I’m glad to be here.

SARAH GREEN: So in the book, you make the case that we’re in a new era that you call the social era. What is the social era, and how is it different from the industrial era or the information age or any of these previous economic eras?

NILOFER MERCHANT: Well, the social era is the context for business in the 21st century. And I make a distinction that in the information era, the best way to create value was through an organizational construct. And today, you can now connect a individuals. They don’t have to belong to an organization or within an organization to create value. And that’s fundamentally what’s different between the past and today.

SARAH GREEN: So you keep talking about social, but I noticed that you’re not saying social media. What’s the difference there?

NILOFER MERCHANT: So the funniest part is whenever I use the word social I’m using it in sort of a capital S, bigger way. And almost always people link that, and they just add an extra word, called media. And that’s because that’s what we’ve largely talked about for the last 15 years, how do we use these tools to communicate better? And while I think that’s important, it just doesn’t go nearly as far as it could for actually allowing us to create value in all parts of the business. HR, product development, distribution, and of course the more obvious ones of marketing and sales can be affected by social in the big-S way.

SARAH GREEN: So when you started observing emerging trends, like crowd-sourcing or open innovation or some of these other ideas, when did you start to think, well, actually, if you kind of pull together these threads, you would get something much bigger than the sum of the parts, that you would get this social with a big S. How did you start to make those observations?

NILOFER MERCHANT: Well, first of all, I’ve been doing this strategy work for 10, 12 years, and actually thinking about the components for quite some time. But I realized as I was helping these big 800 pound gorillas, the sort of giants of industry, they kept looking at the social community programs or different ways you could run a business I’ll call it programmatically. They were just sort of trying to add it on to their business but not actually change anything else about their organizational structure.

And I started realizing that that was actually not creating the leverage point that we needed, and that there was a bigger opportunity. And then one of the reasons I started writing this all down in a more cohesive way is I was sitting in a board meeting and watching my other fellow directors make a set of assumptions in their heads about what the rules of success were. And it was everything from we have to have everyone sitting in our own building in a centralized part of the world to a series of other choices.

And I was sitting there doodling why some of these ideas were really old school. And I realized that my set of beliefs and the things I’ve sort of grown up with because I’ve grown up in tech and worked in tech for the last 20 years, I actually have sort of taken it for granted that all these tools and technologies as they come along can actually affect more. When I came back to my desk I started Googling for an article I could send my fellow board members, because of course I thought, well, I’m right, but I’m sure someone else has written this idea down already and I’ll just find somebody really respectable.

And I remember Googling David Armano and a series of other very thoughtful people and realized no one had written it yet. And to some of these folks, I actually wrote them emails and said, hey, by the way, I’m probably just not Googling it correctly. Have you written this particular idea so I can send it off to these board members? And then I’d be done, that list item in my head would be done.

And all of them wrote back saying no. Nobody’s written that you can actually deliver value, connect value, capture value, all of the parts of a business model. No one’s actually written that. And it just felt like, especially for the big organizations, this was something they needed spelled out more clearly, that for those of us that are maybe the cool kids who live in the social world, we intuit it. But we need to be more explicit and have some more shared language around how we might be able to view this value creation process differently.

SARAH GREEN: So if you had to explain to someone, one of these sort of more old school board members, what’s the crux of the change? How would you explain that?

NILOFER MERCHANT: Well, I was just having coffee with a friend, and the biggest change is that not everyone will create value, but that anyone can, and that fundamental notion that right now we spend a lot of energy as an organization picking and vetting who should be within the walls of our firm, and then we sort of leave everyone else out there. There’s this us versus them sort of thing that’s happening. In the future, you can actually allow anyone to contribute to you. And I give a couple examples in the book that might be worth mentioning here.

SARAH GREEN: I think an example here would be great.

NILOFER MERCHANT: So TED is an institution that has existed for quite some time, 20-plus years. And for a long time, what they did is ran conferences two times in the world. And a couple thousand people knew of them.

Then about four or five years ago, they hired June Cohen and asked her to actually look at how do we start sharing this stuff online. Since we’re already creating all this great content, why don’t we think about how to share it? And that was the first step, and I thought really interesting, when they started sharing videos for free and all the content of the conference starting being shared.

But then they took it another step forward. They actually started doing TEDxes which in fact is really interesting. They basically said, instead of us being the only people who can run conferences about ideas that matter, why don’t we let anyone figure out how to share ideas that matter? Because the ideas that matter in Long Beach, California, or at TED Global in Edinburgh are going to be different than the ones someone might pick, say in Kibera, which is a slum right outside of Nairobi, Kenya. And why don’t we just open up that?

And in fact, they didn’t actually have the notion of Nairobi, Kenya, when they started this. They just said, oh, you know, maybe some people are interested in doing this. Three years later there are now over 3,000 events that have happened, creating content, more importantly conversation, in all different parts of the world, magnifying ideas that really matter close to them. And those people are not just doing it as volunteers, but the notion is they’re able to use the TED platform to share ideas that matter and to create value in the process.

And that’s where I go back to not everyone will, but anyone can. And TED didn’t have to spend the time saying, you, you, you, and you, picking by sort of noses. They could actually say, whoever wants to help create value, you can.

SARAH GREEN: So clearly this has been a great move for TED. But the people who are working for them in this sense, and I use that term loosely, the people who are in a sense working for them, they’re not really getting paid by TED and they can’t really make their living doing that. So then how do people get paid in this kind of loose model?

NILOFER MERCHANT: Yes. So how value gets created, one of the things I’m trying to do is actually point out there are issues, the dilemmas about how people get paid. So in this case, many of the people who are using the TED platform are using it as a way of also building up their community, of being an idea curator and building up their influence in their community. And that give them an asset that’s different.

The main thing is how value is created with others, allowing seemingly disparate individuals to create value that once only a centralized organization could do. That’s the trick here is figuring out how to make it equitable and fair and viable for people, as well as how do you as an organization take advantage of the fact that many people can participate, a group of people you wouldn’t necessary imagine participating.

One of the [INAUDIBLE] sites for Harvard– you’ll remember this one– a couple months ago used an example of Foldit, which was a fascinating game created by people who wanted to actually understand how DNA folded, and that would help them do better research. And when they opened it up, anyone can participate, they expected MIT professors, sort of PhD candidates, yadda, yadda, you know, that kind of crowd to show up and help them.

And the person who ended up becoming the best protein folder in the world was someone who during the day is an admin. And a woman who had never been formally trained in science understood this work. That allows a different set of value creation happen and people who we normally wouldn’t see, we wouldn’t pick for whatever reason, bias being one of them, can now still add value. And we ought to think about how do we take advantage of that. And then of course the issues of payment and reward and so on are, I think, things that continue to be worked out.

SARAH GREEN: Yeah. That’s really interesting because I would say even if we set aside the question of getting paid for the value that you create, and we can sort of see those things, there’s some daylight between them, for instance in this social era, if you’re a manager, how do you motivate employees in this world where maybe your employees aren’t on your payroll? Maybe they’re not even really your employees. They’re just kind of passionate volunteers who want to be associated with your company. How do you manage that?

NILOFER MERCHANT: In a traditional era, which is the era that we’ve already seen go by, it relied on money as a form of exchange. And when we look at this other construct in the social era, there are more ways of being rewarded and more ways of doing alignment than just the direct, I will tell you and you will do what I ask you to do.

What changes in the social era is purpose. So the people who are contributing to the TED ecosystem, the TED platform, aren’t doing it because they’re getting paid by TED. They’re doing it because they have a shared purpose with the TED macro goal, which is to share ideas that matter.

And I’ve said that a couple times, but interestingly enough, that idea is not limited to the walls of TED. That idea is not, hey, TED owns this and by the way, you are now working for them. It’s more, we are in community. And when we are in community, we can actually have a set of purposes you and I might be excited by, as well as what an organization is excited by. It’s broader than what we might have thought of as within the walls of an organization. And that becomes a different way to align people and motivate people.

SARAH GREEN: This is really interesting. And we’ve been talking about it mostly in either sort of idea-generating businesses like TED or in sort of tech/science fields, like we mentioned Foldit. And you mentioned that you yourself come from a very tech background. Is this mostly limited to sort of tech, information-based companies? Or could you see like an oil company or a waste management company also benefiting from some of these sort of ideas?

NILOFER MERCHANT: Yes. So I think there’s two things in what you just said. One is, does it apply to tech or does it apply beyond tech. Of course it does.

I think the whizbangness of everything that we’ve seen come by, meaning we see crowd-sourcing and fast businesses and cloud technology and a series of what I’ll call technology-enabled changes come along, and then we’ve largely talked about them as if it’s about the tool. And I’m just stepping back to say, how could you actually run a business, all different parts of a business, using any of these particular phenomena and tap into that? Because a tool is just a tool. There’s a broader objective that can be met.

And Clay Shirky in his book Here Comes Everybody pointed out that the urge to share wasn’t new, but that before the hurdles to do so were so big that it couldn’t happen easily. And that’s what I’m pointing out. The improvement in what’s possible creates new economic effects. And that adds up to a different kind of business model, which is the way an organization can create, deliver, and capture value. And that’s the shift that I’m trying to point out too, not just the technologies that are the preceding factor.

SARAH GREEN: Hmm. So I’d like for us to telescope back out for a moment to the very macro level and talk about the social era in the context of the previous eras, the Industrial era, the Information Age, because each of those gave us benefits, like a higher standard of living or increased productivity, but also came with some pretty serious costs, whether that’s child labor, or pollution, or cyberwarfare, or just information overload. When you look at the social era, if you’re 50 or 100 years from now, what do you see as some of the signature achievements of that era, but also perhaps some of the unintended consequences, some of the costs?

NILOFER MERCHANT: I think the social era will honor the value creation starting with the single unit of a connected human, and that when we allow that human to work from their shared purpose, they will be engaged and alive and thriving. We largely view business as coming at the expense of people, that it’s either profits or purpose. And I believe the social era will allow us to reconcile those two as being a part of one piece. So I believe that’s going to be upside.

Now the risks and factors in it are how are we going to find ways to compensate people when we don’t have universal health care, when people have no safety net? I think there’s a bunch of risk that happens when work is freed from jobs. Jobs allowed there to be some protection about what was going on. And as work frees from jobs, there’s an opportunity for people not to get compensated and rewarded for the value they’re creating in the system.

SARAH GREEN: So when you mentioned there that work and jobs are becoming separated, that brings me actually back to one of the central metaphors that you use in the book, which is you talk about the new world of work as more like a herd of 800 gazelles than the old organizational structure of being an 800-pound gorilla. Can you just describe what that means?

NILOFER MERCHANT: Yes. So the 800-pound gorilla in business has been aspiration. And it worked as a metaphor. It was the one who dominated over others, perhaps in the form of pricing power or market control, market monopoly. And it was sort of like beat everyone else out.

And I think the social era is going to look a lot more like 800 gazelles, meaning many connected individuals running in the same direction provides a scale that once was limited to a few big enterprises. Now we can have many organizations being able to create scale without being big, per se. And what that gets us, why that’s important is we’re going to be able to be fast and fluid and flexible not because we’re just going faster and working harder, but because inherently this model allows community to organize very fluidly and be able to create value together.

SARAH GREEN: Nilofer, thanks so much for joining us today.

NILOFER MERCHANT: Glad to be here.

SARAH GREEN: That was Nilofer Merchant. Her new book, 11 Rules for Creating Value in the Social Era is available from hbr.org and wherever digital books are sold. For more from Nilofer, visit hbr.org.